Head-To-Head Review: Oxford Square Capital (NASDAQ:OXSQ) vs. Saratoga Investment (NYSE:SAR)

Saratoga Investment (NYSE:SAR) and Oxford Square Capital (NASDAQ:OXSQ) are both small-cap finance companies, but which is the superior investment? We will contrast the two businesses based on the strength of their earnings, institutional ownership, profitability, valuation, risk, dividends and analyst recommendations.

Institutional and Insider Ownership

19.1% of Saratoga Investment shares are held by institutional investors. Comparatively, 6.4% of Oxford Square Capital shares are held by institutional investors. 10.0% of Saratoga Investment shares are held by company insiders. Comparatively, 8.6% of Oxford Square Capital shares are held by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company will outperform the market over the long term.

Analyst Recommendations

This is a summary of current recommendations for Saratoga Investment and Oxford Square Capital, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Saratoga Investment	0	6	0	0	2.00
Oxford Square Capital	1	0	0	0	1.00

Saratoga Investment presently has a consensus price target of $23.63, indicating a potential upside of 2.47%. Given Saratoga Investment’s stronger consensus rating and higher probable upside, equities research analysts clearly believe Saratoga Investment is more favorable than Oxford Square Capital.

Profitability

This table compares Saratoga Investment and Oxford Square Capital’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Saratoga Investment	27.19%	10.09%	3.29%
Oxford Square Capital	-6.39%	14.80%	7.88%

Valuation & Earnings

This table compares Saratoga Investment and Oxford Square Capital”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Saratoga Investment	$148.85 million	2.49	$28.09 million	$2.34	9.85
Oxford Square Capital	$42.68 million	3.37	$5.88 million	($0.04)	-44.00

Saratoga Investment has higher revenue and earnings than Oxford Square Capital. Oxford Square Capital is trading at a lower price-to-earnings ratio than Saratoga Investment, indicating that it is currently the more affordable of the two stocks.

Dividends

Saratoga Investment pays an annual dividend of $3.00 per share and has a dividend yield of 13.0%. Oxford Square Capital pays an annual dividend of $0.42 per share and has a dividend yield of 23.9%. Saratoga Investment pays out 128.2% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Oxford Square Capital pays out -1,050.0% of its earnings in the form of a dividend. Oxford Square Capital is clearly the better dividend stock, given its higher yield and lower payout ratio.

Volatility and Risk

Saratoga Investment has a beta of 0.56, suggesting that its share price is 44% less volatile than the S&P 500. Comparatively, Oxford Square Capital has a beta of 0.5, suggesting that its share price is 50% less volatile than the S&P 500.

Summary

Saratoga Investment beats Oxford Square Capital on 10 of the 15 factors compared between the two stocks.

About Saratoga Investment

Saratoga Investment Corp. is a business development company specializing in leveraged and management buyouts, acquisition financings, growth financings, recapitalization, debt refinancing, and transitional financing transactions at the lower end of middle market companies. It structures its investments as debt and equity by investing through first and second lien loans, mezzanine debt, co-investments, select high yield bonds, senior secured bonds, unsecured bonds, and preferred and common equity. The firm prefers to invest in aerospace, automotive aftermarket and services, business products and services, consumer products and services, education, environmental services, industrial services, financial services, food and beverage, healthcare products and services, logistics, distribution, manufacturing, restaurants services, food services, software services, technology services, specialty chemical, media and telecommunications. It seeks to invest in the United States. The firm primarily invests $5 million to $50 million in companies having EBITDA of $2 million or greater and revenues of $8 million to $250 million. The firm prefer to take a majority stake. It invests through direct lending as well as participation in loan syndicates. The firm was formerly known as GSC Investment Corp. Saratoga Investment Corp. was formed on 2007 and is based in New York, New York with an additional office in Florham Park, New Jersey.

About Oxford Square Capital

Oxford Square Capital Corp. is a business development company, operates as a closed-end, non-diversified management investment company. It is a private equity and mezzanine firm. The firm invests in both public and private companies. It invests in secured and unsecured senior debt, subordinated debt, junior subordinated debt, preferred stock, common stock and syndicated bank loans. The firm primarily invests in debt and/or equity securities of technology-related companies that operate in the computer software, Internet, information technology infrastructure and services, media, telecommunications and telecommunications equipment, semiconductors, hardware, technology-enabled services, semiconductor capital equipment, medical device technology, diversified technology, and networking systems sectors. It concentrates its investments in companies having annual revenues of less than $200 million and a market capitalization or enterprise value of less than $300 million. The firm invests between $5 million and $30 million per transaction. It seeks to exit its investments within 7 years. It serves as the investment adviser to TICC. Oxford Square Capital Corp., formerly known as TICC Capital Corp., was founded in 2003 and is headquartered in Greenwich, Connecticut.